Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
986604 | Review of Development Finance | 2012 | 17 Pages |
Abstract
This paper assesses financial integration in Asia in terms of risk-sharing benefit versus financial contagion cost. We construct a new measure of risk sharing based on a term structure model, which allows identification of realized stochastic discount factors. Risk sharing is low in Asia, and varies across time and countries, whereas contagion risks are more significant intra-regionally, and relatively stable over the past decade. An overall tradeoff exists between risk sharing and contagion, but the terms of tradeoffs vary across countries, depending on relative economic fluctuations and inflation differentials. Asia therefore can potentially enhance risk sharing without raising contagion risk.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Phurichai Rungcharoenkitkul,